The California property insurer of last resort is dangerously close to significant shortfalls, which may necessitate additional charges for carriers. The disclosure was made by the president of the insurer, who was speaking to state lawmakers on Wednesday, as the organization grapples with an overwhelming rush of applications. Bloomberg reports that California’s FAIR Plan is receiving about 1,000 applications daily.
Established in the wake of major wildfires over the past decade, the California FAIR Plan has grown exponentially as conventional insurers have retreated from the market. This has left a gaping insurance gap for both businesses and residents in search of coverage. Legislation is also underway to determine how to most effectively stabilize the market.
The FAIR Plan currently has approximately 370,000 policies active, more than double the number reported in 2019, according to Victoria Roach, the organization’s president. While this still represents a small percentage of the overall market, it’s indicative of the struggles the market is facing. Roach has cautioned that the FAIR Plan is “one major catastrophe” away from resorting to exceptional measures to cover potential shortfalls, which is understandably causing concern within California’s insurance industry.
With no end in sight for the flood of applications, lawmakers are left with the task of finding effective measure to stabilize the volatile insurance market, ensuring adequate coverage protection while also minimizing the financial risk for the various insurers involved.